Sunday, July 31, 2011

The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade.

That would be followed by creation of a new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year. Real Clear Politics

Congress and Obama cannot make it until Jan 2012. $300B of that $1T will be spent immediately to cover internal borrowing over the last two months. That leaves $700B to last through the year when we run debts of $1.5T annually. However, input prices will have risen and taxes lower as a result of the current soft patch. Most government defense programs will see rising costs through the rest of the year due to revisions. Entitlements will see rising costs due to the revised inflation estimates. The federales will run out of money before Christmas.

Every indication is that the debt-ceiling negotiations are leaving the defense budget in grave jeopardy. By exposing critical defense programs to disproportionate cuts as part of the “trigger mechanism,” there is a clear risk that key defense programs will be hollowed out. NRO

What is Bolton's Communist thing? He wants the middle class to fund the Socialist Defense Network so rich people can trade around the globe with military security. He is a damned communist, as are most conservatives and a good deal of the Tea Party.

Here is Bonehead:

But the emerging deal may be imperiled by last-minute reluctance from House Speaker John Boehner (R-Ohio) who worries the proposal cuts too much from future Pentagon budgets.Hill

One of the great virtues of the Boehner bill that passed the House is that it more or less protects defense from further immediate cuts, and, since it has no trigger, there’s no presumption of future cuts either. Weekly Pravda

These folks don't realize there are thousands of libertarians watching them day and night on the web, just waiting for them to reach for their government goodies. It is clear to me the problem is we have two camps working for every larger debt based spending.

He reviews the recent GDP revisions and discovers that all the domestic economy was revised downward but not exports, they have been accurately estimated all through the downturn.
What was the tautological definition of a recession? We are in recession when the banking network is incoherent from the real goods network. NGDP and RGDP match for exports, not for the domestic economy. Domestic consumption, driven by federal spending, is incoherent and unreadable. Exports work just fine.

The correct conclusion would seem to be that federal multipliers are much lower than we think, the opposite conclusion that Menzie reaches. The whole point of Keynes was that we should be pleasantly surprised by upward revisions of the domestic economy.

That title should read: Exports doing fine, Federal spending still Incoherent and Useless. Over the past few years we watched the kid get successively mis-educated by a series of bonehead, ignorant Keynesian economists.

A quick glance at deLongs blog and we we find Gavyn Davies , with more Keynesian nonsense:

So what does it seem we will get? Precisely the opposite. The most likely deal will see around $1 trillion of government spending reductions starting next year, along with an automatic trigger mechanism to ensure that the scale of tightening is increased in a second round of cuts before very long. Furthermore, these cuts may be legislated in advance to take effect whatever the state of the economy is at the time. This means that if the economy slides back into recession, any emergency fiscal action has been ruled out in advance.

No, the GDP revisions tell us that our ability to measure government multipliers is badly broken, or another interpretation is that we cannot locate valuable things for the federal government to invest in or we are crowded out or federal goods are not exportable.

Where to we see the effect of debt based federal spending? In price dispersion, specifically price dispersion between essential imports and domestic prices, the centralized banking system is unable to discover the effects that Menzie discovers. Also notice that the more that federal spending grows relative to other sectors, the greater the divergence in the GDP revisions.

What does Shannon Theory have to say about all of this?

When Congress pushes another bunch of spending into the economy, we get unattended aggregates of goods queuing up. As time passes these aggregates get sold at discount and groups of domestic producers drop out of the economy. Once the inventory corrections are made, the BEA can then report the real results, as if things had gone smoothly. And the real results are downward revisions. If Keynes were correct, the sudden push of federal goods would cause scarcity and price rise.

Shanon Theory would also tell us the local governments are correct, they would see congestion before central data collectors, and begin shutting down programs.

The key insight with Shannon Theory is constant uncertainty. We can operate in the corridor of production until the uncertain limits of inventory risk is reached, then we reconfigure the total of distribution, we make the spanning tree minimal again. But the aggregate signal for reconfiguration occurs when the inventory risk has been distributed, and each step in production notices it equally. The constant of uncertainty seems to be 15%, we must guarantee a 15% inventory reserve. This number came from study of cities by an idle out of work physicist.

We define reconfiguration as a network rank change, up in an expansion down in a contraction.

Just to review briefly, I find the most plausible structural interpretations of the recent downturn to be based in the “we thought we were wealthier than we were” mechanism, leading to excess enthusiasm, excess leverage, and an eventual series of painful contractions, both AS and AD-driven, to correct the previous mistakes. I view this hypothesis as the intersection of Fischer Black, Hyman Minsky, and Michael Mandel.

The correction of course is: Fischer Black, Hyman Minsky, and Michael Mandel; and then Shannon who came around in 1940. I also refer back to what I call the Canadian interpretation that came about in on of Nick Roses posts. He talks about Uncle Milts discussion of uncertainty of measurement and hits upon the idea of constant uncertainty. That realization is the same as the Copenhagen Interpretation for quantum mechanics. It is the key understanding that takes us out of the smooth world of Keynes into the finite channel theory of Shannon, and is the best model of economies of scale we have.

Saturday, July 30, 2011

A Republican briefed on the framework says this will be unacceptable to many Republicans because it could force them to face a choice between accepting tax increases (if that is what the committee recommends) or automatic cuts that would gut the Pentagon's budget. ABC

In the final analysis, both socialist camps prefer default to losing their goodies.
When you force the budget to the wall then the socialists on both sides creep out to fund their goodies and bill the middle class. I say no to Republican Communism. It is time for a middle class revolt against welfarism, whether it comes from the Tea Party or the Progressives.

Calaveras's shrinking property taxes have resulted in cuts to the sheriff's department and public-health services, as well as an effort to cut 10% of the county's budget for the coming year. The tax drop also has pitted the county assessor, who has lowered taxes by re-evaluating home prices, against the head of the county board of supervisors, who said the reassessments have been too aggressive.

"We're getting cremated" by the decline in property taxes, said Tom Tryon, chairman of the board of supervisors. WSJ

The problem is not flexible market pricing of houses, the problem is the past and present sticky wage problem caused by Jerry Brown the younger when he signed the Dills Act. The solutions are either repeal the act, outsource, or default.

Its purpose is to insure enough coverage for all the disparate needs of the Senate. it is an artifact of the lack of democracy in Senate representation. But when we do not have the debt capacity to support the Senate what difference does it make,the Senate is doomed. Why not just abandon cloture now rather than abandon it at the formal bankruptcy, or perhaps this is the formal bankruptcy.

And the real kicker? This whole wrenching effort to shrink the debt may actually increase the debt.

Any emergency deal may not be broad enough to prevent the major credit rating agencies from downgrading the United States as a rock-solid investment. That, in turn, could increase the cost of borrowing for the government (hence more interest and debt), not to mention for everyone else. Canadian Business

No, a downgrade raises the cost of funds and results in less current spending by Congress. The ratings agency prior assumption is that multipliers are low, meaning that if Congress spends less then GDP goes up, taxes rise deficit goes down, total spending goes down, the private sector grows and the federal sector shrinks.

If federal multipliers were high we would not be in this mess, we would have a House full of spenders.

Hello? Bank capital doesn’t consist of canned food or steel ingots held in a vault somewhere, and raising capital requirements doesn’t mean that food or raw materials have be stored in a bunker.NYT

Uh, yes it does. That is the whole point of banking, to match the flow of funds with the flow of real goods. If we made no attempt to match the two then we could never use money for exchange. See my post below in Felix.

Both errors are equivalent. Insurance schemes and reserve requirements both have the same purpose, raise the level of real goods inventories for unplanned events.

Since the devastating Japanese earthquake and, earlier, the global financial tsunami, governments have been pressed to guarantee their populations against virtually all the risks exposed by those extremely low probability events. But should they? Guarantees require the building up of a buffer of idle resources that are not otherwise engaged in the production of goods and services. They are employed only if, and when, the crisis emerges.

So this is how he interprets the argument:

But if you think for a moment about the logical implications of what Greenspan is saying here, they’re truly horrific. Imagine a world where the Japanese government did not insure its population against extremely low probability events like the recent earthquake — this is Greenspan’s example, not mine. The toll of death and suffering in one of the richest countries in the world, which was catastrophically high to begin with, would soar, and the Japanese government, through inaction, would be killing thousands of its own citizens, in a heartless and entirely avoidable decision. Meanwhile, the broader Japanese economy would suffer much more greatly than it already is.

For Felix the banker, money and debt are always equivalent to real stockpiles of goods, but that is not true after a catastrophe. The Japanese economy suffers excessively today today because the Japanese government did not force suffering yesterday in an insurance scheme. Had the government provided insurance, then stockpiles of excess goods would already be available and the excess suffering would have happened years ago when the stockpiles were built up.

My current reading material about how we value the future. For example, when will you go grocery shopping next? Depends on how much food you have in the house. Normally we shop once a week. If you just shopped, then there is no gain from shopping for the next few days. However when the kitchen foodstuff approaches the reserve level, there is a much bigger gain from shopping tomorrow.

So the idea is that we leave some imprecision in our shopping habits, about 15% of food inventory is reserve. This means the what economists call the discount rate on the value of shopping from one day to the next is not uniform.

This author goes through some math to see what happens to a yield curve under the assumption that day to day discounting of money is not constant. I will use Shannon theory of course, and reach a similar conclusion, but my conclusion will apply to all inventory, not just money balances.

It is becoming increasingly clear, however, that the problem is one not only for the US, but for the rest of the world as well. Since December 7, 1941, the world has in large part been able to rely on global governance by a somewhat-competent hyperpower. DeLong

All of these various and bizarre theories of economics do not follow the Euler equations boys and girls. When the so called economists start spouting them they invalidate all of their previous work.

This guy will be proved delusional within the year. Take a look at the volatility of that debt, notice that volatility and level have been increasing for 40 years? Does anyone really believe that Alan Binder will mesmerize us with new thoughts that reduce the volatility? Lets add in spreads over time:

Notice the room to maneuver has been decreasing since the 1980s? Right now we do not have enough spread to support all levels of transactions when we get any mild downturn.

Where are we now in the cycle? Well variance in planned output is as large or larger than growth.

Notice that revisions are of the same order of magnitude as growth, and they are still growing.

So I am a bit confused, how does Alan Binder's version of 20 years of stability come about, we cannot even plan the next year with any accuracy. How would packing the Senate with Keynesians help, they are still unable to plan out beyond a year?

The long end of yields are dropping into the noise, we have not been able to plan for longer than five years since the crash. This entire economy will focus on the short end of the curve, most of the transaction space, the set -iLog(i), will be crowded into the short end. Fewer and fewer voters will vote for politicians that make promises beyond five years.

This man is a liar if he thinks he can predict ten years under these circumstances.

The folks at Princeton and DC want us to be deluded, but most of the economy is in places like Fresno,CA. From here in Fresno a federal default looks awfully nice. Alan is lucky Fresno has only 1/10 of the average Senate representation, otherwise we would be voting default.

SACRAMENTO, Calif. -- Lt. Gov. Gavin Newsom is releasing a plan to jumpstart economic development and job growth in California, stepping to the forefront of a vital issue as his first major policy move since he was elected to statewide office.

Newsom worked with players from the Republican and Democratic parties, business groups, economists and think tanks to develop an agenda for growth and global economic competitiveness as the nation's most populous state struggles to shake off the effects of the Great Recession. He plans to present it to hundreds of business executives Friday in San Jose. California News

Plans to complete his task for the whole state.

"For more than 10 years, the state of California has lacked a strategic, statewide economic plan," Newsom, the former San Francisco mayor, wrote in the proposal's introduction. "And in the last decade, we have reaped the bitter consequences."

By strengthening the Keynesian dictatorship.

The man is a dunce who entered politics because meth addicted voters in SF do not think properly. The solution to California impending bankruptcy will be to break the state up into five smaller states.

Daily Kos has the transcript of the Bloomberg guy talking about entitlements gaps. Here is his crucial statement:

COY: That 's a good point. The social security numbers...the trust fund is not the crucial issue. That's why people say that medicare is where the bigger problem...but, social security...um...[is] probably going to have to have a higher...um...retirement age..but, you know...funny thing...I think that's a good point you're making there. I'm going to go back and look at that more closely for next week's story.

Now my point is that we have been looking at those trend lines for some ten years, I mean we the Blomberg audience and most of the webosphere. So this idiot comes to an interview as an economics editor and just now figured out that SS is not the real problem? This man is either a liar or an idiot; and whoever runs Bloomberg had better take notice.

Friday, July 29, 2011

Global crisis: Policy failure on a massive scale: MAYBE everything will turn out all right…. As each day passes, however, frustration grows. Leaders in America and Europe are dallying with failure on an epic scale.... America and Europe are flailing because their leaders are failing. They seem to be too small for the tasks at hand, too petty, and too myopic.Ryan Avent

This new theory is a lead in to anti-democracy, Ryan is looking for a generous, German fascist and is likely to get the other kind.

Washington (CNN) -- The Republican-controlled House of Representatives on Friday narrowly passed Speaker John Boehner's plan to raise the nation's the debt ceiling and slash government spending, sending the measure to Senate Democrats who have promised to immediately defeat it.

Until a complete bankruptcy we will be budgeting on a quarter by quarter basis.

Yglesias gets confused. Borrowing goes on all the time, it is just DC and the politicos that are no longer credit worthy, they have low multipliers.

Drum cannot understand that inflating away some debt is what central banks do when they have traction. The Central banker in DC has inherited the low multipliers of its major customer and has no traction.

So what happens when DC reduces spending in this situation? Real GDP goes up.

This isn't quite right. There are two ways to inflate away debt. One is to conduct a surprise burst of inflation that ends before much of your debt needs to be rolled over—that is, before markets can demand much higher interest rates, eliminating the benefit of the inflation. The other is to simply force institutions to buy your debt at below-market rates: FT

We can just pretend we are a monarchy and do whatever the current White House Keynesians want to do, hiring the necessary armed police to make it happen.

Two different historians discover the same result, government is completely ineffective at the moment. It is 30 years of rule making resulting in an encyclopedia of rules before one can put shovel to ground.

But it was not always so. A hundred years ago, the Big Creek Hydroelectric Project here in the central Sierra Nevada Mountains of California was the nation's first large effort to generate electricity from falling water -- to provide electric power for a growing Los Angeles nearly 250 miles away.

Industrialist and entrepreneur Henry Huntington conceived the gargantuan effort, begun in 1911. In just 157 days, a supply railroad up the mountains was built with picks, shovels and horse-drawn scrapers by thousands of workers struggling at over 6,000 feet in elevation.

In just two years, electricity was flowing southward from a new powerhouse generating unit at Big Creek that harnessed San Joaquin River water released from the new Huntington Lake reservoir. Victor Hanson

Another:

Henry J. Kaiser, who once built ships in both Portland and Vancouver, would be spinning in his grave in frustration if he knew about this comedy of fools. As the Antiplanner noted once before, Kaiser once responded to a proposal to do a study to build a four-lane road to a housing development he was building by building the road for less than the cost of the study and finishing it before the study would have been done. Anti-planner

Getting the idea?We will not see high government multipliers until the current system completes its bankruptcy.

Gov. Jerry Brown on Wednesday criticized leaders of California's public universities for recruiting highly paid "hired guns" from across the country to run campuses instead of looking for home-grown talent that might be willing to work for lower salaries. Topix

Jerry Brown might check out the Kahn Academy, that organization could probably run lower division academics for the whole university, damn near for free.

Thursday, July 28, 2011

House leaders have one less tool available to persuade members to vote for a Republican plan to raise the debt ceiling. They can no longer offer money for pet projects, known as "earmarks."

One Republican is delighted. Republican Rep. Jeff Flake of Arizona used to regularly criticize the tactic that both parties had used for years.Las Vegas Sun

House earmarks are the highest multiplier spending we have, but we give them up. Why? Because the Senate consumes most of the transactions coming out of Congress. Is anybody getting the concept here?

I talked about the Senate goody factory before, a factory which generates government transactions at rates that satisfy the disparate requirements of state Senators. We cannot have a 13 year entitlement updates in NY New Dealers. intervals unless we schedule 10 year space/defense contracts for Texas and California. That generates 5 year road and rail projects, and so on. The Senate needs all this spectral space to operate. We are defaulting because we cannot make these rates and the Senate has become non-functional.

One of the many traps and impediments facing a Journal editorialist writing about debt is that up until 2009, the US debt burden rose most under the two presidents the Journal most ardently supported: Ronald Reagan and George W. Bush. The debt burden declined most under the presidents the Journal most despises – Dwight Eisenhower, Bill Clinton and Jimmy Carter.Thoma covers it

The WSJ, like the Weekly Standard firmly believes that debt is necessary to supply welfare to their supporters.

In our assessment, the issue is lack of effective governance within the euro zone. Governments had an incentive to run reckless policy – either in terms of budget deficits (Greece), out-of-control banks (Ireland) or refusal to create an economic structure that would support growth (Portugal).Simon Johnson

Anybody think Simon has an unconscious denial problem?
Remember, California has been in a state of near bankruptcy in the last two years of the Gubinator. Jerry Brown's budget collapses in a few months unless we get a cut in Medicaid mandates. If equalization by exchange rate means anything, then I would expect the USA and Europe to have the same intensity of problem, but should show up in different manners.

Rep. James Clyburn and a group of House Democrats are urging President Barack Obama to invoke the 14th Amendment to raise the debt ceiling if Congress can’t come up with a satisfactory plan before the Tuesday deadline. Politico

Summers: No. Surely, the common currency has been insufficiently supported by common political approaches. But we will learn over time from the European experience what elements have to be common in order to make the system work.

SPIEGEL: Has the response of European leaders to the crisis so far been too dogmatic and bureaucratic?

Summers: There is no politician who will ignore the laws of physics when building a bridge. But there is a tendency in politics in every country to suppose that the laws of economics are flexible and can be adjusted to political necessity. At some point this belief has led to a lack of focus on economic realities in Europe. Larry Summers Bragging to Europe

So, Larry, how does the USA evolve to maintain a common currency when multipliers at central government are way below one?

In complaining about the Warren Buffet tax theory he shows this chart:

The rich have a problem in not collecting the government services they pay for, there is cost shifting from local governments to central government. Under minimal conditions, the rich would pay for all of central government functions, but collect all of central government services, mainly shooting Arabs for oil.

Why the cost shifting?
Because rich people are too stupid to notice that the distribution of states are so screwed up that no regional governments exist. If the rich funded the development of regional government organizations, and a redistribution of Senate seats toward fairness, then much of the cost shifting would stop at the regional level and rich people could have all of central government.

It’s difficult to see how it could end otherwise. Virtually no Democrats are willing to go past Aug. 2 without raising the debt ceiling. Plenty of Republicans are prepared to blow through the deadline. That’s not a dynamic that lends itself to a deal. That’s a dynamic that lends itself to a ransom.Ezra Klein

When progressives, like Klein and Yglesias, live by hysteria, they become consumed by their own hysteria. They have serious Hysterical Response Function problems.

"Default with a downgrade is a game changer," warns Tim Ryan, the head of the Securities Industry and Financial Markets Association, "with dire consequences for money funds, capital markets and banking systems broadly. It will be a systemic event in its own right." The Treasury Department will not admit outright that bondholders will get prioritized over, say, Social Security recipients. But they will. Ann Lowrey

Lets give is a some initials, HRF. Economists should look at that. Hysteria yields violence. So, the object of restructuring would be to dissipate as much hysteria as possible before the actual event. As soon as Treasury buys into the concept of a haircut, we can move on.

Remember the ultimate aim is a better distribution of Senators. As Treasury rides out the building hysteria, the price of Senators goes down. If we restructured properly, the debt gets split three ways, regional governments take a third. Entitlements get passed dwn, but the greater the HRF of the beneficiaries, the worse deal they will get.

The big problem right now, clearly, is that businesses are investors are sitting on the sidelines because they’re uncertain of what’s going to happen next, and uncertain of what Washington is going to do about the debt ceiling crisis. Yet another hysteric

The economy has been uncertain about DC since 4th quarter 2008. The uncertainty has to do with DC borrowing money and investing when multipliers are less than one. Has this author noticed that when Treasury curve is about where it has been since then?

Networks theorists release Statement: July 25, 2011
For Immediate Release
Statement: Robert Greenstein's horribly ignorant mathematics on the Boehner proposal are part of a CBPP plot to ensure poverty in America
---------------

In their proposal for more poverty in America, the CBPP posit that only central government can provide welfare for regional groups of poor. In fact, a survey of Europe reveals that almost all their entitlements come from regional government. Regional governments in the USA are held back from responding to the needs of poor because groups like the CBPP only exists due to the concentration of government in DC. As central government cedes more power to regional governments, groups like CBPP will fight decentralization every step of the way. The result? Poor people in America will never have the chance for efficient entitlements, as they do in Europe.

Progressives everywhere should shut down the CBPP for hammering poor people across America. The religion of the Great Exogenous is a disaster sprung upon Americans by elites protecting their own positions in Washington.

“In Washington, more spending and more debt is business as usual,” the Republican leader from Ohio said in a televised address yesterday amid debate over the U.S. debt. “I’ve got news for Washington - those days are over.”

Yet the speaker, House Majority Leader Eric Cantor, House Budget Chairman Paul Ryan and Senate Minority Leader Mitch McConnell all voted for major drivers of the nation’s debt during the past decade: Wars in Afghanistan and Iraq, the 2001 and 2003 Bush tax cuts and Medicare prescription drug benefits. They also voted for the Troubled Asset Relief Program, or TARP, that rescued financial institutions and the auto industry. Bloomberg

Monday, July 25, 2011

Local voters are free to tax UPS for the extra wear and tear of UPS trucks. Doing so allows local voters have two incomes, a walk-in sales tax and a delivery tax. Voters can set the relative rates to maximize their profits.

Money flows to the exportable industries faster than Congress can borrow. Oil, lumber, minerals, and manufacturable exports get the higher and DC gets the negative real rates of return. DC and the MidAltalntic go into poverty, that town and a major portion of NYC have no money. Texas and Canada will immediately have money, very liquid letters of credit for future and current oil shipments oil, much of it to China and Europe. Same for the Northwest lumber, And all Agriculture.

What happens to Socialist banking? The regional Feds goes to work, and agree with Ben that exporting region bonds, commercial and municipal are collateral. The NY Fed is bankrupt and nonfunctional.

What is the GOP saying, that they are too damn stupid to govern themselves they rely on anti-democracy? If I wanted a socialist dictatorship I wouldn't be part of the Tea Party

Boehner was set to meet with his chamber's Republicans to discuss his plan in detail. Aides described it as a two-step process, with an immediate $1.2 trillion in cuts and spending caps coupled with a $900 billion debt ceiling increase.

A new congressional panel would be charged with producing nearly $2 trillion in additional cuts and another increase in the debt ceiling to be voted on next year and a second increase in the debt limit would have to be voted on next year, conditioned on congressional approval of the additional cuts.

To the extent that Germany does have a meaningful veto, then the deal agreed on Thursday will inevitably be tested by markets. Investors will want to know whether she can secure Bundestag approval for the colossal sums needed to make the EFSF credible. Mrs Merkel cannot hve it both ways.

The revamped fund has headline guarantee power of €780bn, but only part can be deployed under its collateral rules. "It needs to be increased in size urgently,"said Citigroup's Willem Buiter."There is nothing to properly protect Italy and Spain from contagion. The crisis could strike again today." UK Telegraph

Anyway, the violence, the Keynesian dictators, the secessions are beginning. Not just here, France is repeating the WW2 thing, trying to force Merkel into a German dictatorship. Even Brad DeLong is on board. People will start arming themselves and taking sides between central dictatorship and break up of the union.

I blame Jerry Brown, Nancy Pelosi and Barbara Boxer. At the very heart of the strife will be Gavin Newsome and the meth addicted, brain damaged, bankrupt voters of San Francisco. Word will come out of the $15 trillion in subsidized loans made to the oligarchs by Ben. The Keynesians will try to say that we have to give up our rights because theory, and 100,000 armed agents, say so.

Secretary of State Hillary Clinton reassured China, the top holder of American Treasuries, that the U.S. will resolve its impasse over the debt ceiling and improve the country’s long-term fiscal outlook.

And:

WASHINGTON (AP) — House Speaker John Boehner says he's working to get out a two-part plan to raise the nation's debt limit, but he can't say whether it will include Democratic support.

Find the links yourself, I am tired.
I think default is better then trying to decode these politicians. The fact is they will attempt a Keynesian anti-democratic coup, and it won't work. Too much diversity in the country to make left wing fascism work.
And this:

A big majority of voters do not believe their politicians will truly get the nation’s debt under control, even as President Obama and congressional leaders work on the issue this weekend.

Almost 3 in 4 voters — 71 percent — say they are either not very confident or not at all confident that the body politic will get a real grip on the debt problem. Only 27 percent expressed some level of confidence that they will.Hill

We are starting to view different government organizations, most of which do not include the Super Congress in DC.

Sunday, July 24, 2011

Carbon nanotubes (CNTs) have well-defined hollow interiors
and exhibit unusual mechanical and thermal stability as well
as electron conductivity1. This opens intriguing possibilities
to introduce other matter into the cavities2–5, which may
lead to nanocomposite materials with interesting properties or
behaviour different from the bulk6–8. Here, we report a striking
enhancement of the catalytic activity of Rh particles confined
inside nanotubes for the conversion of COandH2 to ethanol. The
overall formation rate of ethanol (30.0 mol mol−1Rh h−1) inside
the nanotubes exceeds that on the outside of the nanotubes by
more than an order of magnitude, although the latter is much
more accessible. Such an effect with synergetic confinement has
not been observed before in catalysis involving CNTs.We believe
that our discovery may be of a quite general nature and could
apply to many other processes. It is anticipated that this will
motivate theoretical and experimental studies to further the
fundamental understanding of the host–guest interaction within
carbon and other nanotube systems.

This research comes from 2007, so I become the Human Search Engine, to look for follow up. What is the goal? Direct synthesis of methanol with sunlight and a nanotube chemical chambers.

Samsung Electronics Co., the world’s second-largest handset maker, may have surpassed Nokia Oyj (NOK1V) and Apple Inc. (AAPL) in smartphone sales in the second quarter, driven by the popularity of Android-based models, according to Boston- based Strategy Analytics.

Samsung is estimated to have sold between 18 million and 21 million smartphones globally in the period, compared with 16.7 million for Nokia and 20.3 million iPhones, Neil Mawston, a London-based analyst at the research company, said in an e- mailed response to questions on July 22.Bloomberg

And Microsoft has no clue about any of this:

ComScore issued its May report on mobile subscriber market share in the U.S. last week, and BGR noted that Google’s Android OS and Apple’s iOS grew more popular in the month, mostly at RIM’s expense. Perhaps equally as troubling as RIM’s continued slide, however, is Microsoft’s position with Windows Phone. As noted by winrumors, Microsoft’s share of the U.S. smartphone market has dropped a whopping 35% since it released its next-generation smartphone platform in November of last year. At that time, Microsoft’s Windows Mobile accounted for an estimated 9% of smartphones sold in the U.S. In May, Microsoft’s combined share was just 5.8% BGR

German Chancellor Angela Merkel is facing a storm of protest at home after yielding to EU calls for radical action to shore up Spain and Italy, raising doubts over her ability to implement the package.

The noise I hear around the USA is that Keynesians would prefer a dictatorship of the elite. Citigroup Buiter just made this veiled threat when he demanded more blood from the German middle class.

And there the case for gold—a case that was obscured for a while by the performance of Paul Volcker and (for a time) Alan Greenspan at the Fed—is increasingly compelling, both substantively and politically.Billy Kristol

The whole point of fiat money is to allow Billy and gang to roam around the globe in military hardware.

Reid was “very angry” in the meeting with Boehner and McConnell, according to a Democratic official. Following the meeting, Pelosi escorted Reid back to her office because she didn’t want the furious majority leader to say anything to the press. Reid is “adamant” about no short-term extension of the debt ceiling, the official said.

I think bondholders are figuring this out. Absent serious reform of the Senate system, default is very soon. Put it another way, we cannot reform the Senate without a default.

What’s happening here is business owners, especially those with smaller operations who lack access to faster growing emerging economies, are having trouble forming expectations about future demand. So they can’t plan ahead. That makes them nervous and risk averse in the present.

Getting rid of “Obamacare” wouldn’t help them a whit. Generating some demand could help them a lot. On the Economy

I suppose we could fund the Department of Demanding, fund it at a trillion dollars a year, by soaking up all the excess liquidity in debt issuance. Once the Department of Demanding has all the money, it can then hire customers to walk through doors on a regular basis. To get economies of scale, we can just higher DC customers and pay them to walk in circles through doors.

They evolved from Pork Busters.
Pork Busters was a movement to stop Earmarks.
For small states Earmarks are the connection to DC, absent Earmarks, small states have no reason to be in the union.
This is a bandwidth problem, DC can no longer support the Senate mal proportionment, programs variations among the small, medium and large states cannot be maintained.

The Tea Party is all about Senate dysfunction. Hence the battle of the House vs Obama, the Senate is no longer relevant to the nation.

Saturday, July 23, 2011

House Republicans are finishing work on a new proposal to resolve the standoff over the debt ceiling. The proposal, set to be finished and crafted into the form of a bill by Sunday, will be in two parts. The first will combine a short-term increase in the debt ceiling with spending cuts. The second will lay the groundwork for a longer-term increase in the debt ceiling coupled with far-reaching deficit reduction.WA Examiner

Bankrupt sovereigns have to budget over shorter cycles because aggregate liabilities keep building up. Part 2 of the plan is really another two parts, a short term part and a long term part, repeat indefinitely.

One of the greatest strengths of the MMT approach is that it is not based on theory or mythology. This is why I often say that the name can be misleading. The core of MM “Theory” is just a description of our fiat monetary system’s “Reality”. Pragmatic Capitalism

You can wiggle a knob in the back of the machine and it religiously scales and repeats the same motion each time!

With 23 hours left until the Asian open (or, more importantly, 19 hours until FX trading resumes) and with today's round of talks now official over after a one hour meeting in Boehner's office with congressional leaders achieved nothing, it is becoming clear that the final debt ceiling outcome will be "no change" in spending or taxing habits and a temporary hike in the debt ceiling, so that the soap opera can be repeated again every three months... and again... and again... and so forth for an "extended period of time" as "transitory solutions' become the new grand consensus.ZH

The Hill Reports:

Reid, however, released a statement that was less than optimistic about reaching an agreement on the timeframe of a deal.

"I hope that Speaker Boehner and Leader McConnell will reconsider their intransigence," Reid said in his statement. "Their unwillingness to compromise is pushing us to the brink of a default on the full faith and credit of the United States. We have run out of time for politics. Now is the time for cooperation." The Hill

Reid's problem is that he is delivering, a Nevada middle class of 1% of the total American middle class, and a federal tax penalty of 30%. If anything is going to work, my 1/5 of a Senator, Babs Boxer, has to agree to deliver 12% of America's middle class using a methods of anti-democracy. Can she can deliver California debt service payments for another $4T? No, she has a state secession on her hands. She consistently promises large debt service payments from Southern California voters, who consistently say no!

The mere existence of anti-democracy in California is enough to downgrade DC.

Houston Strategies blog looks over a Time Magazine article on the Megabus, and likes what it sees.

Megabus undermines high-speed rail:

Business Week recently had a feature article on "The Megabus Effect" and how these new cheap luxury intercity bus services are not only extremely popular and growing like crazy, but also deeply undermine the case for spending tens of billions of dollars developing high-speed rail for this country:

The debate on the webosphere is about libertarians who believe in central bank caused general inflation. For actual economists who think this through, what does it mean? If you believe that socialist banking can cause uniform inflation, then you are a damned socialist, not a libertarian.

The whole point of libertarianism is that exchange transactions (rates and size) remain well matched to local desires and wants, network theory. There is an impedance mismatch when overly large government organizations try to move large chunks through this locally defined network, it doesn't flow.

Instead, Kelly Betting networks are set up to manage the aggregates that socialists build up. The Kelly networks match the large chunks of government goods with large chunks of other stuff, they look for a coherency network in real goods. The effect is price distortion, usually in commodities.

So, if government and the Fed have sufficient armed police to enforce socialist transactions, the likelihood is that they simply make apparent to everyone where the real shortages are. Socialism highlights resource shortages.

Liberals and Conservatives are sewn from the same cloth,they both believe in one size fits all.

Initially, Thordarson thought Khan Academy would merely be a helpful supplement to her normal instruction. But it quickly become far more than that. She’s now on her way to “flipping” the way her class works. This involves replacing some of her lectures with Khan’s videos, which students can watch at home. Then, in class, they focus on working problem sets. The idea is to invert the normal rhythms of school, so that lectures are viewed on the kids’ own time and homework is done at school. It sounds weird, Thordarson admits, but this flipping makes sense when you think about it. It’s when they’re doing homework that students are really grappling with a subject and are most likely to need someone to talk to. And now Thordarson can tell just when this grappling occurs: Khan Academy provides teachers with a dashboard application that lets her see the instant a student gets stuck. Wired

What is the key? The classroom should be a seminar, homework sessions. Smaller groups meeting less often. The rest of academics is on the web.

Users are working on the theft problem, it is evidently caused by viruses entering the personal computer and extracting wallet.dat, which should be for owner only.

This is not a systematic problem, which is what concerned me. This is a user data protection problem, to be solved with better technology at the user computer. I think the solution is at hand, mainly Bitcoin applications will require a human at the PC with a password to open and close the Bitcoin applications. To prevent further spoofing, the Bitcoin core application really needs to be in read only memory, a smart card perhaps.

Repeat, the security problem at this time is not systematic as near as the technoweenies can determine.

House Speaker John Boehner told Republican lawmakers they need to provide a positive signal on a plan to avert a U.S. default before Asian financial markets open tomorrow, Republican congressional aides said. Bloomberg

Here is the signal to send to the Chinese: Vote using the exchange rate.

A new survey of Fresno's downtown homeless suggests that nearly 20% are in dire need of help for serious health problems such as mental illness, AIDS and diabetes. Fresno Bee

Seriously. I knew a lot of their moms when younger. I used to ask, what do you do for a living, A lot of them told me straight out, they have babies for the state. This is part of the mess that Jerry Brown the younger created.

Martin says about 30 percent of U.S. patents are essentially on things that have already been invented. In 2000, for example, the patent office granted a patent on making toast — patent number 6080436, "Bread Refreshing Method." NPR

HT DeLong

My own Senator (Babs Boxer) buys into this patent crap and supported first to file! She has no concept of what this is about, and when they legalized software patents, our idiot politicians had no clue. Nor does the patent office, by the way, they are as clueless.

Earlier today, I [Ezra]spoke with David Beers, director of Standard Poor’s sovereign debt department. He explained that it wasn’t economic factors that had put America’s credit rating at risk, nor world events. It was credit-rating agency’s increasing fears that our political system was no longer up to the challenges that face it. “What we’re saying now,” said Beers, “is we question whether despite all the discussions and intense negotiations, if they can’t reach this agreement, will they be able to reach it after the election?”WA Post

The problem, Ezra, is that we no longer have enough middle class to guarantee an additional $4T of debt. It is the middle class that covers the debt service, and ratings agencies look for indications that a real middle class intends to pay for all the rhetoric liberal economist spout. There is no middle class willing to cover the costs. Minnesota middle class chose to go fishing rather than fund government. California spends most of our time in court trying to force middle class payments. Illinois citizens have to cover the $40 billion owed by the state, not counting their share of the $14 T.

98% of our jobs are in the non-tradeable sector, China has not yet indicated that it intends to import Medicare services from the American government.
People like Dean Baker, Ezra Klein, Mark Thoma who do not realize that sheriffs, guns, violence and the threat of violence are required to collect debt service.

The Orange County Employees Association's request for a preliminary injunction was approved this week, which means that the city of Costa Mesa will experience a temporary halt in its plans to cut hundreds of workers and outsource their jobs. It is the beginning of a legal process that first started in May when the labor group sued the city to stop the layoffs by arguing it was a violation of state law and the union’s contract. Cal City

Given the lack of Due Process, Ca taxpayers should feel morally free to evade taxes.

(WASHINGTON) -- The Senate has officially adjourned for the weekend without passing the Federal Aviation Administration reauthorization bill -- meaning that at midnight Friday there will be a partial shutdown of the aviation agency.

The FAA’s current funding will expire Friday night at midnight -- without Congress approving new funding legislation. Approximately 4,000 FAA employees will be furloughed, including employees who collect taxes from airlines and construction workers assigned to airport projects. The shutdown does not impact air traffic controllers. WAPI

Menlo park, Sand Hill Road, I thought you bozos were going to hire some High School kids and make an air traffic controller app for the Android. What happened to free enterprise and all that? I should convene the staff at Imagisoft and discuss this issue.

“Now is the time for action on both raising the debt ceiling and tackling the U.S. debt and deficits through significant and lasting spending reduction, entitlement reform and tax reform,” he said. “The sense of urgency is clear — failing to raise the debt ceiling would do irreparable harm to our credit standing, would undermine our ability to lead on global economic issues and would damage our economy.” Hill

Oh yes, he was borrowing money by the ton and committing the taxpayer to a $16 trillion bank bailout, according to Bernie Sanders.

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.” Higgins Quotes the Man

The essential Bernie thrust is that the crash of 2008 causes the takeover of the Fed by Big Finance, simple theft on all fronts.

I tire of reading these. If there is a boondogle wasting tax payer money in and around SF, then Pelosi and Newsome likely caused it. Remember Newsomne, the guy who left SF nearly broke than goes to Texas trying to find out why their cities are not broke?

The California High-Speed Rail Authority isn’t the state’s only massive choo-choo boondoggle. San Francisco boasts the Central Subway project, a wasteful train system all its own.

Fortunately, citizen volunteers, transportation and rail experts and local writers have been making noise about the Central Subway project. But no one in public office appears to be listening, or care.CalWatch

Politicians shifting around the liability bubble in the government channel. Brown sends some liabilities to the county and city, some up to DC. DC with Affordable Care sends some liability to the state. And so on. In the article you will discover that 1/3 of the stimulus was used to sustain Medicaid, even as Pelosi and Affordable Care made Medicaid more unsustainable..

The debate comes as California seeks to plug a $26.6 billion budget gap, the worst of the 50 states. To get there, the state last month adopted a bare-bones budget for 2011-2012 that slashes Medicaid by about $1.4 billion.

In a June 27 letter to the president, Brown urged Obama to approve the state’s request.

Somewhere along the road, liberal economists lied to their progressive counterparts. They told them that people have a natural desire to pay taxes for government services not rendered. Kevin Drum still beats this message:Amazon's Scorched-Earth War Against the Rest of Us

Amazon can avoid retail taxes because they can avoid retail outlets. When Amazon shuts down affiliates, they shut down local on-line marketing, distribution still takes place across state lines via USP.

Let me explain to Kevin what makes an actual retail outlet different. When a retail outlet closes its door, consumers no long walk through the door to pick stuff up! Kevin Drum is driven by some nonsensical view that remains uncorrected. The government provides actual services that make it convenient for strangers to shop regularly at retail outlets.

Senate Majority Leader Harry Reid (D-Nev.) canceled all weekend work for the Senate on Friday, saying it is no longer necessary.

"It looked earlier this week like the Senate would have to originate legislation perhaps as soon as today to avoid default,” he said. "Circumstances have changed. The Speaker of the House and the president have been working to reach agreement on a major deficit-reduction measure.” Hill

It is the Senate that has failed to pass a budget proposal. Their excuse? 'We are dysfunctional and should be abolished'

“A terror group, Ansar al-Jihad al-Alami (the Helpers of the Global Jihad), issued a statement claiming responsibility for the attack, according to Will McCants, a terrorism analyst at C.N.A., a research institute that studies terrorism. The message said the attack was a response to Norwegian forces’ presence in Afghanistan and to unspecified insults to the Prophet Muhammad.” NYT

Part two in my series on McLuhan theory and information shock and Channel channel theory. Lets cut to the chase:
The web is a high utilization, high bandwidth media, White Hot using McLuhan terminology.

Cool media has lots of redundancy im the symbol set, making is easy to decode. Television, lots of visual cues in the screen to support the simple dialogue. TV uses the series format so users can reduce bandwidth usage even further. So, the greater we fill the channel, the more difficult the decode.

The Web is White Hot. When we decode the stream, we get far more detail, orders of magnitude more, about any subject. I requires our apt attention to use it, but we get all the information very shortly.

WASHINGTON — The chairman of the Senate Budget Committee says it's impossible to enact spending cuts, a tax code overhaul and changes in benefit programs in the less than two weeks left before an Aug. 2 government default deadline.

Sen. Kent Conrad says a short-term extension of the debt limit is the most likely solution for Congress and the White House.

The Democrats were winning, the senators said. The American people were with them on tax increases for the rich and the notion of “shared sacrifice.” Why give up now? Why cut a deal without guarantees of new tax revenue?

For 45 minutes, the cross-examination went on, with few details offered. When Lew left, Mikulski turned to her colleagues and said, “I haven’t seen a meeting like this in my 35 years in Congress.”

Uh,Oh; the T Word:

The T-word — “triangulation” — began to circulate across Capitol Hill as lawmakers recalled how President Bill Clinton distanced himself from his party’s liberal base and from conservatives as he positioned himself for a reelection run. WA Post

The retail people come with pitchforks and requantize the short end. Been doing this for 250 years, longer in other parts of the world. This time its the flash mobs, highly mobil and intelligently guided.

The factory we want is nanoscale, but a somewhat complex plumbing system. A huge Bucky Ball that contains an electron catalyst, embedded in a light transparent substrate. Some sections of the Bucky Ball structured to admit CO2 and H2O, and one that pumps out CH3OH.

How do we make a nanotube chemical factory? Trained bacteria will build them. Or we lay the factories out on the substrate on sheets, but do it in three or four layers.
This catalyst is acting like a bucket brigade switch, shifting among positions so the ions jump on board. It can assemble the alcohol near the exit port, where the alcohol is sucked out. More likely this will be a two step process, hence two large chemical Bucky chambers connected, each having a separate catalyst molecule, exchanging assemblies.

The Bank of England was the piano player, who had a major role but did not conduct the session. The piano player was sometimes off key, making the music sound discordant.

We see spectral lines when we shine bright white light at crystals and molecules. Quantization of electrons among discrete energy bands, a queueing problem. As if all other electrons had a prior agreement on step size to avoid shortages in energy flow during excitation.

In the same way, the Bank of England is restricted to a set i, as in -iLog(i). During a musical change (shock), the skew in the ensemble results as the band searches the sonorous chord. They have to march to the new chord, minimizing steps.

By now I’ve read many more other commentaries. My basic opinion hasn’t changed much, but here’s another way to frame it. The EU pledges that Greek creditors will take a hit but that this will never ever happen again, not with Spain or Italy in particular. That’s not a credible promise, if only because of the magnitudes involved, and so over time it shouldn’t influence the borrowing rates of those countries very much. It’s worth a small amount to have the promise made at all, but the comparable promises made about Greece were just broken so who is being fooled here? Marginal Revolution

Bondholders are immune from promises don't we think?
Who are Herkel and Serkel making promises to? Why, their own middle classes: I promise this is the last subsidy we steal, in cash, for someone else's bad bet.

Instapundit wants us to look at New Atlantis who points us to this quote:

There is a basic principle that distinguishes a hot medium like radio from a cool one like the telephone, or a hot medium like the movie from a cool one like TV. A hot medium is one that extends one single sense in “high definition.” High definition is the state of being well filled with data. A photograph is, visually, “high definition.” A cartoon is “low definition,” simply because very little visual information is provided. Telephone is a cool medium, or one of low definition, because the ear is given a meager amount of information. And speech is a cool medium of low definition, because so little is given and so much has to be filled in by the listener. On the other hand, hot media do not leave so much to be filled in or completed by the audience. Hot media are, therefore, low in participation, and cool media are high in participation or completion by the audience. Naturally, therefore, a hot medium like radio has very different effects on the user from a cool medium like the telephone.

What is the Shannon Theorem? Bits of info per channel bandwidth = log(1+SNR)

McLuhan is saying the hot medium have high SNR, so have a high symbol rate. You can passively watch TV because the actual symbol rate is low. The information flow over the telephone is slow, but so is the bandwidth. Radio optimizes the information flow, it arranges its programs to maximize symbol flow. Television, visual images, are inefficient because we really don't use the visual image, we eye track across it and trace a pattern.

Hot medium require attention, they require good channel tuners to avoid distortion. The web is white hot, I would think, according to this classification.

CHICAGO (CBS) – It’s hard to imagine, but some children are going to school without air conditioning during this heat wave.

As CBS 2′s Susanna Song reports, parents with children in summer school at William Penn Elementary School were gathering Thursday morning to speak out against what they’re calling “unbearable conditions” in the classrooms.CBS Chicago

In the last chapter of the concept, we had vertical nanotube sheets embedded in light transparent polyethelyne or equivalent. There are way to mass produce this I think.

Using this we make half acre size flat bags tat float on the ocean. Their bottoms have equivalent vertical nanotube sheets. We flow algae through tubes of this stuff, which we unfurl from small ocean trawlers.
The top side performs electron exchange due to the tuned properties of the nanotube. So, our algae, minus clorophyll, feed on this ionized nutrient soup on the top underside. The bottom side admits sea nutrients, including CO2??

Hmm, if we could get the top layer to take in CO2 and deliver CO, that could be great! That is, we have carbon nanotube, it should be easy to move CO thru the tube, the most efficient thing for a bucky ball, right? So the top layer knocks off two steps in photosynthesis, greatly simplifying the task of genetic engineering. We have a trade wherin we can mix up the 'culture' of the tubes, some delivering H+, some CO-.

How aout the direct production of alcohol from a solar nanotube array?
The tube will need a metal based reducer molecule trapped. Can we do complex nanotube chemical synthesizers? Methanol doesn't seem like difficult chemistry.

OK, some facts about global warming. There exists a measurement of GW damages over regions. This measurement has some large variance.

So, on behalf of the humans who produce less than Holocene emissions, Congress sues those who produce more GW. Of course, these last two measurements are hugely accurate, they can be measured with low cost digital.

What happens? People form bicycle commuting clubs with their handhelds, they buy algae fuel. The defendants get a checks collected from the polluters.

You all know my new point of view, we are talking about a species that can set the temperature of its own world. In the race between algae fuel and fossil fuel, algae wins.

That would clearly be nonsense. After all, debt (which is measured in currency units) and GDP (which is measured in currency units per unit of time) yields a ratio in units of pure time. There is nothing special about using a year as that unit. A year is the time that it takes for the earth to orbit the sun, which, except for seasonal industries like agriculture, has no particular economic significance.Project Syndicate

What is so special about the yearly period? It gets awfully cold in Germany each winter, the Sun rotates in one year, crops only bloom once a year generally. The yearly cycle is basic to economic planning.

Schiller is delusional.

What really happens under debt crashes? Well, there is not enough time and space for the number of transaction needed to cover debt repayment during the allocated period. So the debt trade has a bubble to deal with.

President Obama and top House Republicans are deep in negotiations over a far-reaching plan to save $3 trillion over the next decade through sharp cuts in agency spending and politically painful changes to popular health and retirement programs, but without any immediate increase in taxes, Democratic congressional leaders Pelosi reported Thursday.

Since Boehner has the majority, Pelosi will need Reid to stop this. Reid does not like to be in the spotlight here, he wants to go home and start explaining to Nevada why their voters pay a 28% penalty on Federal taxes.

One state lawmaker is trying to overturn a new law that requires California homeowners in rural areas to pay an annual fee for fire prevention services. Sen. Ted Gaines (R-Roseville) filed referendum papers late Wednesday. KMJM

Brown and the law now requires rural homeowners to pay an extra fee for fire protection. But who runs the fire patrol? Well its complicated, sometimes the socialist state, sometimes the socialist county and sometime the private sector.

I understand why the Republicans haven't proposed a carbon tax--they, after all, aren't worried about the deficit Brad

If the issue is just collecting taxes, then I think we debunked the notion that people see taxpaying as fun and exciting. He quotes Ryan Avent:

When we emit carbon into the atmosphere, we impose a tiny negative cost on society as a whole in the form of more rapid global warm and a greater intensity of the accompanying social ills.

Who educates these idiots? Why would transferring the global warming costs from one sector to another help?

This is a pretty straightforward policy solution, and it's one that's been embraced by economists and various other wonks for years....

More bullshit. Smart economists calculate both sides of the trade. Ryan has no model for how government is going to spend its collected do-re-me. Let me give Ryan a hunch, government is less energy efficient than the private sector. Want a pointer? Look at the rise in oil prices and imports whenever Congress tries a stimulus stunt.

“We all have an obligation to prevent our country from going into default,” Pelosi said. LA Times

No we don't.

Pelosi said that, like just about everyone on the Hill, she has no idea what form a final package might take -- just 12 days away from a potentially catastrophic default.

Well, the most efficient result is default, it will be catastrophic for her, but not me. It means that when Felix Salmon sends in his armed agents to collect debt service, there will be less to collect.

Solvency crises don't depend on multiple equilibria, but on changing fundamentals. And fundamentals can change slowly and predictably over time. But solvency depends on expectations of those fundamentals -- whether people expect Greece will be able to pay bonds coming due in 2021. And those expectations should not change slowly and predictably over time.Canadian Initiative

Investors have a finite set of alternative investments. They may think Greece is doomed, but they cannot escape. California is doomed, Congress is nearly broke, and my own county, Fresno is on the brink. If the requirement is a sovereign bond investment, then all sovereign investments will approach the same risk/price ratio.

A new white paper, titled “Warning: Hollow Force Ahead,” which has just been released by the American Enterprise Institute, the Heritage Foundation, and the Foreign Policy Initiative, warns of the negative consequences of a thinner defense. Weekly Standard

Badly dressed African dictators may be a common threat to the American household, but a minor one. This article is really about Billy Kristol protecting his favorite government goodie. Republican Communism on Parade by the Weekly Standard

The problem is, when the debt service gets to high for the taxpayer, Felix also believes bondholders have the right to call the local sheriff. If government is not like a family, then please return the thousands of dollars a typical family budgets for government debt service.

From the book Manias, Panics and Crashes. Bubbles hop around a connected economy, they spiral.

Channel Theory explanation:

The excess liquidity needs a production system for the traders, a multi-stage investment pass through that collects dimes and invest dollars, the Corridor Hypothesis. The trade system is stuck trying to find the wholesale investment that matches the trading production system output. We can call it a spectral constraint, they need to find a particular -iLog(i), investment sequence to match some external restriction, generally the yield curve restricting their investors.